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The risk of massive short sales are precisely to the naked short-sellers because you can be required to deliver at any time and if you fail to deliver you broke
by quantgenius 14y ago
The risk of massive short sales are precisely to the naked short-sellers because you can be required to deliver at any time and if you fail to deliver you broker or the DTC can buy you in at any price, and charge you an enormous commission on that specific trade.
- joe_the_user 14y agoAll this does hinge on whether an entity is going to be heavily penalized for failure to deliver. Can you reference me instances of such penalities being applied? I searched for instance and instead found this: http://www.billcara.com/archives/2006/09/a_failure_to_de.html http://www.billcara.com/archives/2006/09/a_failure_to_de.htm...
- roel_v 14y agoNo, it hinges on entities being held to the same standard as any other contracting party in the economy. Party A agrees to do something for party B in exchange for a sum of money, party A doesn't hold up its end of the deal, now B has a claim on A for damages suffered because of A not doing what they promised. (technically the law is more nuanced, of course - there is a whole field in law dealing with the subtleties of this, but this is what it comes down to, and it's the same whether it's for stock or grain or a wedding dress).